Question

# The current value of your portfolio is \$850,000 with an expected return of 1.5% and a...

The current value of your portfolio is \$850,000 with an expected return of 1.5% and a beta of 1.1.

You are adding 15,000 shares Neuvo Inc. at at a current market value of \$150,000 to your portfolio.

Neuvo Inc.  has an expected return of 3.0% and a beta of 1.2.

Calculate the portfolio's REQUIRED return if the T- bill is returning 1.3% and the market return is 2%.

E(r) = [Wi x Ri]

= [{\$850,000 / (\$850,000 + \$150,000)} x 1.5%] + [{\$150,000 / (\$850,000 + \$150,000)} x 3%]

= 1.28% + 0.45% = 1.73%

#### Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
• ### The beta for Cowboy Industries, Inc. is 1.2. The expected return on the market portfolio is...

The beta for Cowboy Industries, Inc. is 1.2. The expected return on the market portfolio is 14.0% and the risk-free rate is 3.0%. If the CAPM/SML is correct, what is Cowboy Manufacturing’s required (expected) return? Group of answer choices 16.2% 13.8% None of these are correct. 12.9% 11.1%

• ### What is the E(R) on the following portfolio if expected market return is 7.5% and the...

What is the E(R) on the following portfolio if expected market return is 7.5% and the RF rate is 1.5%? Asset A: Investment = \$2500, Current Market Value = \$2000, Beta = .8 Asset B: Investment = \$1500, Current Market Value = \$3500, Beta = 1.3 Asset C: Investment = \$1000, Current Market Value = \$4500, Beta = 1.0 Answers: A) 10.65% B) 9.16% C) 7.39% D) None of the above

• ### 8-3a Expected Portfolio Returns Calculate the expected return of the portfolio based on the following individual...

8-3a Expected Portfolio Returns Calculate the expected return of the portfolio based on the following individual investments and its percentage of the total portfolio. Expected Return Weight -5.4% 10% 3% 23% 3.9% 20% 10% 0% 50% 20% B. 8-3b Portfolio Risk Based on the expected portfolio retums below, te expected return for the portfolio is 5.8% (you can check this). Calculate the standard deviation of the following portfolio: Expected Return Probability 10% 1% 8-3e Beta-Part 1 Returns on technology stocks...

• ### Consider the following information: Expected Return 5% Portfolio Risk-free Market Beta 0 1.0 1.3 8.0 a....

Consider the following information: Expected Return 5% Portfolio Risk-free Market Beta 0 1.0 1.3 8.0 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.3. (Round your answer to 2 decimal places.) Return % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha T %

• ### Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...

Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at \$10 a share and adding it to your portfolio. Alpha has an expected return of 22.5% and a beta of 1.20. The total value of your current portfolio is \$90,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...

• ### Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...

Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at \$15 a share and adding it to your portfolio. Alpha has an expected return of 21.5% and a beta of 1.70. The total value of your current portfolio is \$85,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...

• ### Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...

Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at \$15 a share and adding it to your portfolio. Alpha has an expected return of 21.5% and a beta of 1.70. The total value of your current portfolio is \$85,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...

• ### Problem 3: Calculating a portfolio's beta and CAPM-based expected rate of return Ashley is curious to...

Problem 3: Calculating a portfolio's beta and CAPM-based expected rate of return Ashley is curious to know what her portfolio's CAPM-based expected rate of return should be. After doing some research, she determines that the current market values and betas of each of her 5 stock are as listed below. She is informed by her financial advisor that the risk-free rate is 3% and the market risk premium is 8%. Calculate the expected rate of return on Ashley's portfolio. Stock...

• ### You are managing a risky portfolio with an expected return of 15%, a variance of 0.0784,...

You are managing a risky portfolio with an expected return of 15%, a variance of 0.0784, and a beta of 1.4. Suppose that the T-bill rate is 5% and the S&P500 stock index (as the market index) has an expected return of 10% and a variance of 0.04. Your client chose to invest 80% of her portfolio in your fund and the rest in a T-bill money market fund. What is the Sharpe ratio of your client’s portfolio? A. 0.4466...

• ### Based on current dividend yields and expected capital gains, the expected rates of return on portfolios...

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 7.1% and 8.3%, respectively. The beta of A is .6, while that of B is 1.5. The T-bill rate is currently 4%, while the expected rate of return of the S&P 500 index is 8%. The standard deviation of portfolio A is 21% annually, while that of B is 42%, and that of the index is 31% Think about what...